Companies

To reduce dependence on IPPs, Suzlon to focus on captive customers

M Ramesh Chennai | Updated on January 17, 2018

Tulsi Tanti, Chairman and Managing Director of Suzlon Energy

To Tulsi Tanti, Chairman and Managing Director of Suzlon, the biggest risk is preponderance of independent power producers (IPPs) in its customer profile.

What if something happens elsewhere in the world, like the collapse of Lehman Brothers, and funds-starved IPPs exit the market even if for a few years, is the question that is facing the man who founded the ₹9,562-crore wind turbine manufacturer.

In 2015-16, as much as 89 per cent of Suzlon’s sales came from IPPs (companies in the business of generating and selling energy.) Most of the rest comprised public sector companies.

Tanti does not like this customer profile much.

“We have to think of what will happen if IPPs go out of market,” Tanti told BusinessLine last week. “We have to develop our market based on domestic customers,” he said.

What is ideal, according to him, is 20 per cent PSUs, 40 per cent IPPs and 40 per cent the lucrative ‘captive market’, or, companies that put up power plants to produce electricity for their own consumption.

Captive customers

Tanti sees a big market in ‘captive customers’ because today Indian manufacturing companies pay upwards of ₹7 per kWhr, who would find cheap wind power a big help.

As such, Suzlon’s pitch to the various state regulators and policy makers such as NITI Aayog, is to strengthen regulations for ‘wheeling and banking’, or enabling power generators to ‘bank’ their surplus power with the electricity distribution company and draw it back later, for a nominal ‘wheeling’ charge for using the discom’s grid.

Calling it a time-tested model, Tanti noted that Suzlon has 1,600 customers in Tamil Nadu alone.

These customers are small and medium textile companies who are “financially extremely healthy” because their power cost works out to around 50 paise a kWhr.

A wind power plant produces power for a good twenty-five years, and the cost of the power they produce, averaged over the period, works out to less than ₹4, even if they do not avail themselves of any financial sops.

Financial aspects

However, as the power plant owner keeps paying off the loans, the cost tapers and works out to around 50 paise, which is the cost of maintenance and insurance.

Making power available at 50 paise a kWhr is one of the two fundamental requirements for the ‘Make in India’ initiative to be successful, the other being proving subsidised interest rates for capital goods (such as wind turbines) used for business, Tanti said.

Outgrow the market

Tanti believes that the Indian wind power market will increase 15 per cent annually, and Suzlon would grab a higher share of the growing market.

In the current year, Suzlon would carve out 40 per cent of the market for itself and maintain market share at that level later, he said.

Last year, 900 MW of Suzlon’s machines were installed, giving it a 26 per cent share of the 3,472 MW pie.

Tanti counts among Suzlon’s strengths the ability to acquire land and having blade manufacturing units in almost every windy State.

Unlike the competition, he said, Suzlon has its own set-up in each state to buy land.

He made light of the growing competition in the field, saying that Suzlon knows the complex Indian market best.

Published on August 28, 2016

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